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Can Traditional Media Build the Next Groupon?

By now everybody knows the story. Groupon started in 2007 as The Point, then morphed into a group buying site juggernaut with a reported $2 billion run rate (Mashable) that launched an army of 500 clones led by Living Social, which itself, after receiving $175 million in Amazon funding, yesterday sold 1 million vouchers of $20 Amazon gift certificates for $10 each. The question is, why didn’t yellow pages, newspapers, or direct mailers — the original coupon companies — do this first? And how can they be the ones to innovate next time? The answer lies in how traditional media businesses have treated the internet. As Simon Waldman points out in his brilliant book Creative Disruption, before 2000 most media companies doubted the internet would impact their revenues more than 10 percent. Then after the dotcom bust they thought the internet might go away. Then it was an add-on in a bundle. Now, as revenues tumble, traditional media companies are embracing the internet as resellers. They resell Google campaigns, manage Facebook and Twitter campaigns, and even sell other companies’ Groupon clone deals. They are agencies. Maybe innovation is so expensive and risky it only works in a start-up culture. Achieving radical core transformation, like IBM achieved in the 1990s going from mainframes to services, causes massive dislocation and enormous senior level commitment. Others have achieved it almost by accident – the Washington Post luckily back in 1984 acquired the Kaplan education business, whose profits now offset the newspaper’s losses. Traditional media companies feel they must protect their core businesses and so are reluctant to disrupt them. But to thrive they must challenge their core (or make smart bets on start-ups). The next Groupon, whatever it may look like, is being launched right now by 3 kids in a garage somewhere, with no legacy business to protect.